Hazelnut market: Actually, with the hot days of the last few weeks, it had been hoped that the vegetation would catch up a bit. However, it turns out that this hazelnut season we are almost two weeks behind the normal schedule. So while the first batches have been dropped off at local dealers and crackers this week, the quantity is still so small that no representative conclusions can be drawn.
Quality of coming harvest
To make matters worse, the quality of the batches that have been delivered so far gives a rather poor impression of the coming harvest. There is an above-average number of bad kernels (rotten, mold), as well as a higher risk of aflatoxins. This is explained by the temporary bad weather conditions, the fact that no preventive measures have been taken due to the high prices for plant protection products, and an increased occurrence of the marmorated tree bug. As we said, this is only a snapshot from the gardens of the areas near the beaches of the Black Sea coast.
On the other hand, the quality of nuts from the higher elevations, as well as from the Akcakoca region, is said to be good. Dramatization of the situation can also be used to persuade the market leader to make the highest possible purchase bid. The lack of a bid continues to be the reason why the market has not yet really taken off. In particular, the major crackers, who traditionally work for the market leader and have a certain signal effect on the market, are currently still very cautious.
Rumors about payment of TMO
From September, farmers can deliver the goods to the TMO. The conditions should be the same as last year. There is still no report on the status of appointments for the delivery of goods. Rumors that the TMO will not pay farmers until 30 days after they turn in their nuts have caused some displeasure. Would the hazelnut farmers still lose about 3.5% in interest if they took the money on the open market and put it directly into the bank?
Also therefore the height of the purchase bid of the market leader will play an important role. After all, the inflow to the TMO can be indirectly controlled in this way. To put this into perspective, however, it must be said that the market leader clearly represents its interests and does not act in the interests of other market participants. Rather, we see that the market leader will go its own way in the future and begin to break away from the existing structure. This will lead to new conditions in the coming season at the latest.
Surprise of Central Bank
While the commodities market has not yet picked up speed, the Turkish central bank surprised with a major interest rate move on Thursday. Overall, the key interest rate was raised from 17.5% to 25.0% p.a. Most analysts had expected an increase to a maximum of 20.0% p.a. due to the previous interest rate steps. The president seems to be giving the new fiscal policy leadership a little more room for maneuver.
The step was presumably taken in view of the fact that inflation has recently picked up significantly. While it was still below 40% in May and June, it jumped again to just under 50% in July. Regional elections will be held again in Türkiye at the end of March 2024. Since the opposition had aggressively proclaimed the issue of inflation during the election campaign, the government should do everything possible to ensure that the spectre predicted by the opposition does not materialize.
A key factor in this is a stable exchange rate. Since it is no longer possible (financially) to sell foreign currency for stabilization, the only option left in principle is the interest rate screw, which, however, slows economic growth if it is operated too strongly, but which is also urgently needed.
Lira gained strength against other currencies
All in all, the central bank’s action caused the lira to gain significantly against the other major currencies for the time being. However, the lira gave up some of its gains in the course of the rest of the week. The impact on exporters’ price lists has therefore been noticeable, but in relation to what has happened in recent weeks, it is not significant.
Overall, we have seen this week that exporters have become rather more cautious due to the reports from the market. Offers that were significantly below the price level of the major exporters have almost disappeared from the market. Buyers are now reacting with restraint and are shifting to a strategy of waiting or accompanying the market.
Next week, the market leader should now announce its positioning, otherwise, it will become increasingly complicated for suppliers. We recommend perhaps not yet next week, but in the following weeks to observe the market closely. Should the central bank keep the exchange rate stable for the next few months, raw material prices would again be significantly under consideration and these are likely to be the most favorable in the coming months. It will also be exciting to see what quantities the small traders with their own financial strength will be able to buy and at what point they would have to finance, or if this season the levy on a commission basis will make a comeback.
On the part of buyers, there is still disbelief about the current price level, as well as its consistency. Therefore, we expect little activity next week.
Bullet points
- The Turkish Central Bank surprised the markets with a major interest rate hike of 7.5%. As a result, the Turkish lira temporarily gains strength, but subsequently gives up gains.
- Furthermore, hardly any raw material enters the hazelnut market (vegetation is behind the usual schedule).
- Reports of poor quality are unsettling suppliers in particular.
- The market leader continues to observe the market and has not yet positioned itself; accordingly, the rest of the market is also still reacting with restraint.
- The offers are still very heterogeneous, but there are almost no outliers downstream. Demand has fallen sharply. Buyers are waiting, or are now taking a short-term view.
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